Qorvo, Inc. QRVO reported relatively healthy second-quarter fiscal 2025 results, with both adjusted earnings and revenues surpassing the Zacks Consensus Estimate.
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The company reported a revenue contraction year over year due to a net sales drop in the High-Performance Analog (HPA) vertical. Despite major improvements in channel inventory, the persistence of low demand in some key end markets impacted the top-line growth.
Net Income
On a GAAP basis, the company reported a net loss of $17.4 million or a loss of 18 cents per share against a net income of $97.5 million or 99 cents per share in the prior-year quarter. The significant decline in year-over-year earnings is attributable to lower revenues and higher operating expenses.
Non-GAAP net income was $179.8 million or $1.88 per share, down from $235.5 million or $2.39 per share in the year-ago quarter owing to soft revenues. Nevertheless, the bottom line surpassed the Zacks Consensus Estimate by 3 cents.
Qorvo, Inc. Price, Consensus and EPS Surprise
Qorvo, Inc. price-consensus-eps-surprise-chart | Qorvo, Inc. Quote
Revenues
Net sales during the quarter declined to $1.05 billion from $1.10 billion in the prior-year quarter. The top line beat the Zacks Consensus Estimate of $1.03 billion. Despite significant improvement in inventory levels, demand in various end markets has yet to recover fully, which has impeded revenues.
Macroeconomic headwinds also impacted the top line. Nevertheless, the company secured major deal wins for its ultra-wideband portfolio in a flagship Android smartphone and a leading German automotive manufacturer.
Segment Results
HPA contributed $148.3 million in revenues, down from $149.8 million in the year-ago quarter. Inventory corrections in Cellular base station markets affected net sales in this segment.
However, Qorvo secured new product orders for several large domestic and international ground-based radar systems. The transition from legacy mechanical systems to active electronics scanning systems is driving growth in the defense and aerospace business.
In power management, the company continues to boast a strong presence in the consumer electronic sector. Healthy traction in automotive also cushioned the top line. Growing demand for DOCSIS 4.0 hybrid power doublers is supporting growth in the infrastructure business.
Revenues from Connectivity and Sensors Group (CSG) were $146.8 million compared with $103.6 million in the year-earlier quarter. The improvement was driven by the growing adoption of Wi-Fi 7 across operator, retail, enterprise and mobile segments. Investment in diverse growth businesses, including an expanding portfolio of automotive solutions and SoCs for ultra-wideband, also supported this segment.
Net sales in Advance Cellular Group were $751.4 million, down 11.6% year over year from the prior-year quarter’s $850.1 million due to seasonal dynamics.
Other Details
On a GAAP basis, gross profit declined to $445.3 million from $489.7 million, with respective margins of 42.6% and 44.4%. Non-GAAP gross margin was 47% compared with 47.6% in the prior-year quarter. Non-GAAP operating income was $212.2 million, down from $279.4 million in the year-ago quarter, as non-GAAP operating expenses increased to $279.8 million from $245.8 million, owing to higher investments in new product development.
Cash Flow & Liquidity
As of Sept. 28, 2024, QRVO had $1.1 billion in cash and cash equivalents and $1.55 billion of long-term debt. The company generated $127.8 million in cash from operating activities, with a free cash flow of $94.8 million. During the quarter, Qorvo repurchased $81 million shares at an average price of $110 per share.
Outlook
Qorvo actively invests in diverse businesses to broaden its portfolio and enhance market exposure. Management expects the decline in channel inventory to continue in the upcoming quarters. In addition, the company expects an unfavorable mix due to a shift from the mid toward entry-tier Android 5G smartphones. Consequently, Qorvo is aiming to consolidate factories and reduce operating expenses to achieve its long-term profitability objectives.
For third-quarter fiscal 2025, the company approximated revenues of $900 million (+/- $25 million). Non-GAAP gross margin is estimated to be approximately 45%. Non-GAAP earnings per share are likely to be in the range of $1.10-$1.30. The company expects non-GAAP operating expenses to be approximately $265 million in the December quarter.
For fiscal 2025, Qorvo anticipates revenues to be slightly down compared to fiscal 2024, owing to two factors affecting the smartphone business.
QRVO’s Zacks Rank
Qorvo currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Upcoming Releases
Motorola Solutions, Inc. MSI is scheduled to release third-quarter 2024 earnings on Nov 7. The Zacks Consensus Estimate for earnings is pegged at $3.36 per share, suggesting growth of 5.33% from the year-ago reported figure.
Pinterest, Inc. PINS is scheduled to release third-quarter 2024 earnings on Nov. 7. The Zacks Consensus Estimate for earnings is pegged at 34 cents per share, suggesting growth of 21.4% from the year-ago reported figure.
Light and Wonder LNW is scheduled to release third-quarter 2024 earnings on Nov. 12. The Zacks Consensus Estimate for earnings is pegged at $1.11 per share, suggesting growth of 37% from the year-ago reported figure.
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